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Nicaraguan
Economy
The Phoenix
The
Nicaraguan economy system can be described as a phoenix, because it
managed to emerge from the ashes. Inflation was at one stage sitting
at over 10 000% but then evened out to 10%.
The most important thing one should know about the Nicaraguan
economy is that it has historically been based on the export of cash
crops such as bananas, coffee and tobacco. On the other hand, maize,
beans and rice are grown for domestic consumption. Therefore, we can
say that the main component of Nicaragua’s economy is agriculture.
The principal manufacturing industries are food, drinks, the
production of chemicals and oil refining. There is also a small
mining industry working deposits of gold, silver, lead and zinc.
Also, the Nicaraguan rum is renowned as among the best in Latin
America, and its tobacco and beef are also well regarded.
However, during the Contra War in the early 1980's, much of the
country's infrastructure was damaged or destroyed, and inflation ran
for a time at several thousand per cent. Because of Nicaragua’s
economic travails during the last 20 years, this country is now one
of the poorest countries in the Americas.
Sadly, domestic mismanagement, Western economic sanctions and the
cost of the civil war against the ‘contras’ meant that the
Sandinista period was one of continuous economic decline.
Nevertheless, Nicaragua's economic situation improved dramatically
with the 1990 election of Violeta Chamorro and the establishment of
a democracy.
GDP
(Gross Domestic Product) rates reached peak and foreign investment
returned to make use of the country's commercial potential. The
majority of potential growth lies in the agricultural sector,
however, great potential also exists in the following sectors:
energy generation, tourism, export manufacturing, mining and
construction as well as the sale of consumer goods (e.g. Cars and
computers). Due to this, Nicaragua was set to become the Americas'
quickest growing country.
In the early 1990s, Nicaragua implemented a Structural Adjustment
program supervised by the IMF. Also, it required several injections
of emergency aid after a series of major natural disasters (like
floods and droughts) that caused huge damage to the agricultural
economy. Low commodity prices and the pressure of a substantial
foreign debt exacerbated the country’s economic difficulties.
On the other hand, in 2001, Nicaragua was a beneficiary of the
Heavily Indebted Poor Countries (HIPC) initiative, which wrote off
part of the debt. It reached completion point in January 2004,
resulting in an 80 per cent reduction in external debt. Annual
growth in 2004 was 4.2 per cent, while inflation was 9.3 per cent.
Finally, in 2005, finance ministers of the leading eight
industrialized nations (G-8) agreed to forgive Nicaragua's foreign
debt, as part of the HIPC program. Nowadays Nicaragua is a member of
the Central American Common Market and the Inter-American
Development Bank.
As of 2005 the GDP growth rate was at 4 percent and the inflation
rate on consumer prices was at 9.6%. Nicaragua's debt, however,
still remains high. By putting certain agreements into action,
Nicaragua's economy could once again improve in the future.
Nevertheless, despite this expansive growth in Nicaragua's economy
which took place after the new form of government came in, Nicaragua
still remains one of the poorest countries in the region and faces
issues such as unemployment, low per capita income and great foreign
debt. In recent years, the annual growth on Nicaragua's GDP has been
very low.
Just as in many developing countries, a large segment of the
economically poor in Nicaragua is women. In addition, a relatively
high percentage of Nicaragua's average homes have a woman as head of
household:
39% of urban homes and
28% of the rural ones.
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